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Tuesday, January 12, 2016

Thinking of Buying the Playboy Mansion? Buyer Beware!

This interesting article comes from the Real Estate Magazine.  Apparently buying Hugh Hefner's Playboy Mansion isn't all it's cracked up to be!  I hope whomever buys it reads the fine print!
The famous Playboy mansion—home to Hugh Hefner—is reportedly going up for-sale in the next month but the sale will be contingent on having a “life estate,” media outlets are reporting.

The six-acre Beverly Hills estate boasts 29 rooms (six bedrooms) and is rumored to be hitting the market for $200 million. The listing reportedly also will stipulate that 89-year-old Hefner a “life estate,” which means he would be able to continue living there until he dies.

That prompted realtor.com® to look at the history and liabilities of “life estate” arrangements.
“Life estates go way back to the earliest roots of the common law, and they are great for providing for someone to live in his or her own home until death,”  says David Reiss, research director at the Center for Urban Business Entrepreneurship at Brooklyn Law School. “Effectively, a life estate grants the [original owner] many of the indicia [characteristics] of full ownership for the rest of his life. Upon death, complete ownership of the property can pass to another. A common example would be where a husband bequeaths a life estate in the home to his wife, with the remainder to his children upon her death.”

Hefner’s deal would differ in that he’s not bequeathing his home to family members but to an unknown third-party.

“This seems like a version of a reverse mortgage, because it frees up equity in the home during the owner’s lifetime without interfering too much with his use and enjoyment of the property,” Reiss says.

Reiss says a contract coming with a death-till-we-part tenant likely will bring down the $200 million asking price. Many experts put the mansion more at $80 million to $90 million.
“The life estate would likely significantly reduce the fair market of the property, because the purchaser must defer taking possession as well as other aspects of ownership—renovating it, for example—until the death of the life tenant,” Reiss says. “Moreover, the purchaser must deal with the uncertainty of the life estate: Will it end in a year or in 10 years?”

Life estates can also raise a host of legal problems, such as questions over liability.
“What if there’s a fire and the place burns down? What if Hefner falls down and breaks his hip?” Wendy Flynn, a real estate professional in College Station, Texas, notes to realtor.com®. “After all, it is known as a party house.”

Source: “Playboy Mansion for Sale – With One Tenant for Life,” realtor.com® (Jan. 11, 2016)

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